Higher crude oil prices boost Asian biodiesel sentiment

11 June 2009 07:46  [Source: ICIS news]

(Revises fourth paragraph; adds pricing information in paragraphs five and six; adds quote in paragraph seven)

SINGAPORE (ICIS news)--Rising crude oil prices over the past three weeks have boosted sentiments in the ailing Asian biodiesel market despite limited trading, market sources said on Thursday.

Trade in Asian biodiesel had been muted so far this year as market conditions were made unfeasible due to rising feedstock vegetable oil values and tepid crude oil prices. This made vegetable oil-based biodiesel an unattractive alternative to traditional fossil fuels.

Most biodiesel plants in Indonesia and Malaysia were idled or were operating at very low rates as poor demand and thin margins capped production in the region.

However, the uptrend in crude oil prices in recent weeks, as well as relative stability in palm oil prices, might provide a much-needed boost to trade in the struggling Asian biodiesel industry, market sources said, as the spread between prices of crude oil derivatives and vegetable oils was narrowing.

Forward month ICE gasoil prices rose $20/tonne from last week to $560-570/tonne on Thursday due to high crude values.

Conversely, healthy vegetable oil production and poor export volumes weighed on crude palm oil (CPO) prices, with June delivery futures trading at ringgit (M$) 2,500/tonne ($714/tonne), falling M$75/tonne from 4 June.

A seller based in Singapore said there was renewed interest in biodiesel sales from the region, although traded volumes were still limited, with market participants taking a wait-and-see approach.

"The numbers seem workable, but there are no buyers yet," the marketing executive of a major Malaysian plant said, adding that most traders were biding their time to see if the situation was sustainable.

Biodiesel manufacturers in Asia include Vance Bioenergy, Carotino, Mission Biotechnology and Wilmar.

($1 = M$3.50)

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By: Jeremiah Chan
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